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Res 2016-03-148 - FY 2015 Audit.pdf
CITY OF ANNA, TEXAS RESOLUTION NO. 2016-03-148 (FY 2015 Audit) A RESOLUTION ACCEPTING THE FISCAL YEAR 2015 FINANCIAL AUDIT OF THE CITY OF ANNA. WHEREAS, the City of Anna, Texas ("the City") is committed to principles and practices of open and fair government that honor the public trust; and WHEREAS, Article 7 Section 7.18 of the City's Home-Rule Charter ("the Charter") requires an annual independent audit of all accounts of the City by a certified public accountant NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ANNA, TEXAS, THAT: Section 1. Recitals Incorporated. The above-referenced recitals are incorporated herein as if set forth in full for all purposes. Section 2. Investment Policy Reviewed The City Council has hereby accepted the FY 15 audit attached hereto as exhibit 1. PASSED by the City Council of the City of Anna, Texas, on this the 8t" day of March, 2016. 0 F ATTEST: �®`` ,. °°A ED: ti' * •. Carrie L. Smith, City Secretary '® `•. t e°Cris , Mayor rf fr'���il�l1!I I1044441R����hi \ Susan LaFollett, CPA-Partner Rod Abbott, CPA- Partner FaFo tt and Abbott PLLC Certified Public Accountants To the City Council of the City of Anna, Texas We have audited the financial statements of the goveminental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Anna (the "City"), for the year ended September 30, 2015. Professional standards require that we provide you with information about Our responsibilities under generally accepted auditing standards, as well as certain information related to the planned scope and timing of our audit. We have communicated suchinformation in our letter to you dated October 21, 2013. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative A4'pects of Accounting Prctica5 Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note A to the financial statements. The City adopted one new policy during fiscal year 201.5, which was GASB No. 68, Accounting and Financial Reporting for Pensions. We noted no transactions entered into by the City during; the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosure affecting the finanCial statements was: The disclosure of long;-term debt in Note F to the financial statements. This disclosure provides detail of debt terms, future payments, interest rates, and other information for each debt. The financial statement disclosures are neutral,, consistent, and clear. Dif ,riczilli(-�,Y.lticoi,intere(I in Pefbrnfing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstateinents Professional standards require us to accurnulate all misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. The misstatements detected as a result of audit procedures are presented on Attachment 1. ......................-,.-............ LaFollett and Abbott PLLC PO Box 717 - Tom Bean, TX - 75489 903-546-6975 . www,.Iafollettcpa.com Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representation We have requested certain representations from management that are included in the management representation letter dated March 8, 2016. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the governmental unit's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the governmental unit's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. This information is intended solely for the use of City Council and management of the City and is not intended to be, and should not be, used by anyone other than these specified parties. Very truly yours, jo,q"a4v� 6" PUA Torn Bean, Texas March 8, 2016 ATTACHMENT CITY OF ANNA-FY2015 PROPOSED AUDIT ADJUSTING ENTRIES AJE# WIP REF: ACCOUNT# DESCRIPTION DEBIT CREDIT 1 G-4 60-000-28XX NET PENSION LIABILITY 252,433 60-000-3720 UNRESTRICTED NET POSITION 200,539 60-000-18XX DEFERRED OUTFLOW OF RESOURCES 51,894 252,433 252,433 Record the Water Fund's beginning net pension liability as an adjustment to prior periods per GASB 68 paragraph 137. 2 G-4 60-000-18XX Deferred Outflow- Excess Investment Returns 7,661 60-701-6125 TMRS Retirement 13,896 60-705-6125 TMRS Retirement 3,585 60-710-6125 TMRS Retirement 3,144 60-000-18XX Deferred Outflow-Contributions after 12/31/20XX 19,946 60-000-28XX Deferred Inflow-Actual Experience vs Assumptions 38,973 60-000-28XX Net Pension Liability(current year change) 31,991 59,598 59,598 Record the Water Fund's FY15 change in the TMRS net pension liability and changes in related deferred outflows of resources and pension expense per TMRS actuarial measurement date 1213112014. 3 D-8.1 10-000-1155 Accounts Receivable-Court 75,789 10-000-1199 Allowance for Bad Debt Court 69,764 10-000-2110 Deferred Revenue-Court 8,720 10-552-5110 Court Fines 2,695 78,484 78,484 To update court accounts receivable for CY activity. 4 A-29 10-000-3711 Fund Balance 200 10-400-6799 Other Services-Misc. 200 200 200 TO PROPERLY STATE GENERAL FUND BEGINNING FUND BALANCES. 5 H-2 60-701-6780 Electricity 24,486 60-000-2001 Accounts Payable 24,486 24,486 24,486 TO ACCRUE AN INVOICE NOT INCLUDED IN AP 6 E-2 60-701-6785 Bad Debt Expense 28,622 60-000-1198 Allowance for Doubtful Accounts 28,622 28,622 28,622 To update the allowance for the current year. 7 F-1 99-000-2753 Bonds Payable Current 2014 GO B REF 52,000 99-000-1710 Amounts to be Provided 52,000 52,000 52,000 TO PROPERLY STATE SERIES 2014E BOND DEBT. 40-611-5840 Bond Proceeds 6,981 40-611-6792 Costs of Debt Issuance 6,981 6,981 6,981 TO PROPERLY STATE SERIES 20148 BOND PROCEEDS AND COSTS. 8 F-2 60-000-2730 BONDS PAYABLE 1,910,000 60-000-2730 BONDS PAYABLE 2,598,000 60-701-6XXX ISSUE COSTS 61,374 60-000-11XX DEFERRED LOSS ON REFUNDING 201,626 60-000-2731 BONDS PAYABLE-CURRENT 450,000 60-000-2730 BONDS PAYABLE 398,000 60-701-6790 INTEREST EXPENSE 192,085 60-705-6790 INTEREST EXPENSE 192,085 60-701-6799 OTHER SERVICE-MISC 11,170 3,007,170 3,007,170 TO PROPERLY POST SERIES 2014A BOND ISSUANCE ENTRIES AND CORRECT RELATED DEBT ACCOUNTS. 9 G-1 10-550-6101 Salaries 10,537 GF 10-580-6101 Salaries 4,046 10-580-6102 Salaries OT 717 10-000-2029 Wages Payable 15,300 WF 60-400-6101 Salaries 11,210 60-400-6102 Salaries OT 656 60-000-2029 Wages Payable 11,866 27,166 27,166 PBC AJE to correct the wage accrual. 10 G-2 99-000-1710 Amounts to be Provided 25,874 GLTDAG 99-000-2740 Accured Camp.Absences 25,874 WF 60-701-6101 Salaries 4,748 60-000-2550 Accured Camp.Absences 4,748 30,622 30,622 To correct the client's erroneous update entry. 11 F-9 60-000-1145 CASH RESERVES 1,224 60-000-1140 DEPOSITS HELD IN TRUST 69,149 60-000-2731 BONDS PAYABLE-CURRENT 52,000 60-000-2738 CO's Payable-Other than Current 52,000 60-000-2600 INTEREST PAYABLE 5,115 60-701-6790 INTEREST EXPENSE 27,547 60-000-11XX DEFERRED LOSS ON REFUNDING 16,802 60-701-5530 INTEREST REVENUE 12,711 60-701-6799 MISC ADMIN EXPENSE 63,293 149,920 149,920 TO UPDATE GTUA BALANCES AND AMORTIZE DEFERRED REFUNDING LOSSES. 12 C-7 10-580-6933 Capital Improvements-Streets 11,361 10-580-6320 Maint. &Repair-Streets 11,361 10-550-6911 Machinery& Equipment 4,095 10-550-6302 Maint. &Repair-Equipment 4,095 72-752-6941 Other Capital Expenditures 4,059 72-752-6799 Other Services-Misc. 4,059 50-627-6703 Capital Facilities Contract Services 35 50-635-6941 Other Capital Expenditures 35 19,550 19,550 To reclassify non-capital expenses out of capital outlay accounts 13 C-5 60-000-1640 Sewer treatment system 706,685 60-000-1650 Water and Sewer System 61,253 60-702-6703 Contract Services 4,504 60-702-6756 Engineering 20,163 60-702-6951 Water System Improvements 36,586 60-706-6703 Contract Services 23,605 60-706-6756 Engineering 28,625 60-706-6952 Sewer System Improvements 654,454 767,937 767,937 To post part the year end AJE previously not posted 14 D-3 89-000-1215 Receivables-Local Business Loans 35,642 89-000-2115 Deferred Revenue- Local Business Loans 35,642 35,642 35,642 TO PROPERLY STATE CDC NOTE RECEIVABLE RELATED BALANCES. 15 1-3 60-000-1203 Receivables-Due From Trust Funds 1,600 60-701-6799 Other Services-Misc. 2,100 60-000-1209 Receivables- Due From Capital Projects Fund 500 2,100 2,100 40-000-2104 Payable-Due to Capital Projcets Fund 1,600 40-611-6799 Other Services-Misc. 1,600 1,600 1,600 50-000-2102 Payable-Due To General Fund 500 50-625-5499 Miscellaneous Revenue 500 500 500 10-000-1209 Receivables-Due From Capital Projects Fund 35,000 10-000-1203 Receivables- Due From Trust Funds 35,000 35,000 35,000 TO PROPERLY STATE DUE TO/FROM BALANCES. 16 D-6 89-000-1215 Receivables-Local Business Loans 41,310 89-000-2115 Deferred Revenue- Local Business Loans 41,310 41,310 41,310 90-000-1215(new) Receivables-Local Business Loans 100,427 00-000-2115(new) Doferred Revenue-Local Business Loans 100,427 100,427 100,427 TO UPDATE LOAN BALANCES DUE TO THE EDC AND CDC. 17 G-4 99-000-17XX Amounts to be Provided- Pension accounts 540,432 99-000-18XX Deferred Outflow-investment Experience 21,841 99-000-18XX Deferred Outflow-Contributions after 12131/20XX 204,805 99-000-28XX Deferred Inflow-Actual Experience vs Assumptions 111,107 99-000-28XX Net Pension Liability 655,971 767,078 767,078 TO ESTABLISH PENSION RELATED LIABITY BALANCES IN THE L-T DEBT ACCOUNT GROUP. CITY OF ANNA,TEXAS ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30,2015 CITY OF ANNA,TEXAS ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30,2015 Table of Contents Page FINANCIAL SECTION Independent Auditor's Report.............................................................. 1-2 Required Supplementary Information: Management's Discussion and Analysis.............................................. 3-8 Basic Financial Statements Government-wide Financial Statements Statement of Net Position.......................................................... 9-10 Statement of Activities............................................................... 1 I Fund Financial Statements Balance Sheets—Governmental Type Funds...................................... 12 Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Position..................................................................... 13 Statement of Revenues,Expenditures,and Changes in Fund Balances-- Governmental Funds............:................................................... 14 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures,and Changes in Fund Balances to the Statement of Activities 15 Statement of Net Position—Proprietary Fund............................... 16 Statement of Revenues,Expenses and Changes in Net Position— Proprietary Fund................................................................... 17 Statement of Cash Flows—Proprietary Fund.............................. 18 Notes to Basic Financial Statements.................................................. 19-40 Required Supplementary Information: Budgetary Comparison Schedule--General Fund.................................. 41 Schedule of Changes in Net Pension Liability and Related Ratios—Last 10 Years....................... ..................................... 42 Schedule of TMRS Contributions..................................................... 43 Combining Statements Non-Major Governmental Type Funds—Balance Sheets— ............................. 44 Non-Major Governmental Type Funds---Combining Statement of Revenues, Expenditures, and Changes in Fund Balances— .......................................... 45 COMPLIANCE AND INTERNAL CONTROLS SECTION Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards............... 46-48 FINANCIAL SECTION Susan La Follett,CPA—Partner Pod Abbott, CPA Partner LaFo tt and Abbott PL LC Cert eei Pubflc Accountants INDEPENDENT Nlf ENT AUDITO 'S REPORT To the City Council of the City ofAnna,Texas Repoft on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activity, each major fund, and the aggregate remaining fund information of the City of Anna, Texas (the City), as of and for the year ended September :30, 2015, and the related nates to the firiancial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Resl_;o rsibilityfrrrtutee rFirrrcrrciaxl Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's ResImnsibil ty Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards genet-ally accepted in the United States of America and the standards applicable to financial audits contained in Government Auclititkg Standcrrcls, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the arnounts and disclosures in the financial statements. The procedures selected. depend on the auditor's .judgment, including the assessment of the;risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,the auditor considers internal control relevant to the entity's preparation and lair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. ,Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our :audit opinions. 01V Il%()res In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, business-type activity, each major fund, and the aggregate retraining fund information of the City of Ana, 'Texas, as of September 0, 201.5, and the respective changes in financial position, for the year then ended in accordance with .accounting principles generally accepted in the United States of America. 1 LaiFollett and Abbott PLLC PO Banc 717 • Turn Bean, TX � 75489 903-546-6975 . www.lafol'lettcpa.com Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison information on pages 3 through 8 and 41 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. The retirement system funding information on pages 42 and 43 are also not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America,which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The combining and individual nonmajor fund financial statements on pages 44-45 are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards,we have also issued our report dated March 8, 2016, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Governinent Auditing Standards in considering the City of Anna, Texas internal control over financial reporting and compliance. 0664 R 't Tom Bean, Texas March 8, 2016 2 CITY OF ANNA MANAGEMENT'S DISCUSSION AND ANALYSIS Our discussion and analysis of City of Anna's (the City) financial performance provides an overview of the City's financial activities for the fiscal year ended September 30, 2015. Please read it in conjunction with the City's financial statements,which begin on page 9. FINANCIAL HIGHLIGHTS • The assets and deferred outflows of the City exceeded its liabilities and deferred inflows at the close of FY15 by $36,919,669. This is an increase of $2,231,493 over FY14's restated net position value of $34,688,176. Unrestricted net position at the close of FYI is $2,668,877 and may be used to meet the City's ongoing obligations to citizens and creditors. This is a decrease of $246,722 from FY14's unrestricted net asset value of$2,915,599. • The City's governmental funds reported on page 12 have an ending fund balance of$4,196,102, which is an increase of$609,620 in comparison with FYI ending fund balances of$3,586,482. This increase was mostly attributable to favorable results for the City's General Fund. $2,414,801 of the governmental-type fund balance is classified as "unassigned" and available for spending at the City's discretion and in compliance with the City's financial policies. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The government-wide financial statements include the Statement of Net Position and the Statement of Activities (on pages 9-11). These provide information about the activities of the City as a whole and present a Iong-term view of the City's financial condition. They reflect the flow of total economic resources in a manner similar to the financial reports of a business enterprise. Fund financial statements (starting on page 12) report the City's operations in more detail than the government- wide statements by providing information about the City's most significant funds. Governmental fund statements tell how services were financed in short-term, as well as what resources remain for future spending. They reflect the flow of current financial resources, and supply the basis for funding requests and the appropriations from the State. Proprietary fund financial statements report activity for the City's water, sewer, and sanitation operations. The notes to the financial statements (starting on page 19) provide narrative explanations or additional data needed for full disclosures for the government-wide statements and the fund financial statements. Reporting the City as a Whole—Government-Wide Financial Statements The Statement of Net Position and the Statement of Activities Government-wide financial statements, which provide an analysis of the City's overall financial condition and operation, begin on page 9. The primary objective of these statements is to show whether the City's financial condition has improved or deteriorated as a result of the year's activities. The Statement of Net Position includes all the City's assets, deferred outflows, deferred inflows, and liabilities (including long-term items) while the Statement of Activities includes all the revenue and expenses generated by the City's operations during the year. Government-wide statements utilize the accrual basis of accounting, which is the same method used by most private sector companies. 3 All of the current year's revenue and expenses are taken into account regardless of when cash is received or paid. The City's revenue is divided into the following categories: 1) charges for services, 2) operating grants and contributions, 3) capital grants and contributions, 4) general revenues not associated with any specific program function. All of the City's assets are reported whether they serve the current or future years. Liabilities are also reported regardless of whether they must be paid in the current or future years. These two statements report the City's net position and changes in them. The City's net position provides one measure of the City's financial health or financial position. Over time, increases or decreases in the City's net position are one indicator of whether its financial health is improving or deteriorating. To fully assess the overall health of the City, you should consider non-financial factors as well, such as changes in the City's request for services from citizens and the condition of the City's facilities. In the Statement of Net Position and the Statement of Activities,the City has two kinds of activities: Governmental Type Activities — City services such as police and fire protection, street maintenance, parks, economic and community development, and city administration are reported here. City property taxes finance most of these activities. Business-Type Activities - The City uses proprietary (business-type) funds to account for its water, sewer, and sanitation operations. The services are supported by monthly charges to citizens. Reporting the Ci 's Most Si nificant Funds Fund Financial Statements The fund financial statements begin on page 12 and provide detailed information about the most significant funds. The City's two kinds of funds-governmental and proprietary—use different accounting approaches. Governmental Funds — The City reports most of its basic services in governmental funds. Governmental funds use the modified accrual basis of accounting (a method that measures the receipt and disbursement of cash and other financial assets that can be readily converted to cash) and they report balances that are available for future spending. Governmental fund statements provide a detailed short-term view of the City's general operations and the basic services it provides. We describe the accounting differences between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds in reconciliation schedules found on pages 13 and 15. Proprietary Funds — The City uses proprietary (business-type) funds to account for its water, sewer, and sanitation operations.The full-accrual basis of accounting is used for all proprietary type funds. GOVERNMENT-WIDE FINANCIAL ANALYSIS Sixty-one percent (61%) of the City's net position are invested in capital assets; land, streets, parks, buildings, water/sewer infrastructure, vehicles and equipment, less any outstanding debt used to acquire these assets. The City uses capital assets to provide services to the citizens they serve; consequently,these assets are not available for future spending. 4 The following tables summarize the Statements of Net Position and Changes in Net Position for the years ended September 30,2015 and 2014: Governmental Activities Business-type Activities Total FY15 FY14 FY15 FY14 FY15 FY14 Current and other assets $ 5,618,149 $ 4,114,822 $ 12,701,342 $ 14,206,765 $ 18,319,491 $ 18,321,587 Capital assets 19,388,284 18,787,557 35,400,713 33,815,299 54,788,997 52,602,856 Total assels 25,006,433 22,902,379 48,102,055 48,022,064 73,108,488 70,924,443 Deferred outflows of resources 204,805 - 264,325 - 469,130 - Total deferred outflows of resources 204,805 - 264,325 - 469,130 - Long-term liabilities outstanding 6,178,660 6,438,271 26,470,309 26,653,867 32,648,969 33,092,138 Other liabilities 1,800,083 461,859 2,080,658 1,931,667 3,880,741 2,393,526 Total liabilities 7,978,743 6,900,130 28,550,967 28,585,534 36,529,710 35,485,664 Deferred inflows of resources 89,266 - 38,973 - 128,239 Total deferred inflows of resources 89,266 - 38,973 - 128,239 - Net Position: Net investment in capital assets 13,288,789 12,463,939 9,150,846 7,161,432 22,439,635 19,625,371 Restricted 1,781,301 1,265,399 10,029,856 11,632,410 11,811,157 12,897,809 Unrestricted 2,073,139 2,272,911 595,738 642,688 2,668,877 2,915,599 Total net position $ 17,143,229 $ 16,002,249 $ 19,776,440 $ 19,436,530 $ 36,919,669 $ 35,438,779 Governmental Activities Business-type Activities Total FY15 FY14 FY15 FY14 FY15 FY14 Revenues: Program Revenues: Charges for services $ 1,060,450 $ 1,057,939 $ 6,194,327 $ 5,980,176 $ 7,254,777 $ 7,038,115 Operating grants and contributions 15,053 11,525 - - 15,053 11,525 Capital grants and contributions 1,417,514 783,182 755,508 486,155 2,173,022 1,269,337 General Revenues: Property taxes 3,322,054 2,807,140 - - 3,322,054 2,807,140 Other taxes and franchise fees 1,923,896 1,767,071 - - 1,923,896 1,767,071 Other 379,533 174,851 77,064 73,451 456,597 248,302 8,118,500 6,601,708 7,026,899 6,539,782 15,145,399 13,141,490 Expenses: General government 1,058,719 963,243 - - 1,058,719 963,243 Economic/CommunityDevelopment 355,165 400,496 - 355,165 400,496 Police and court 1,634,235 1,447,695 - - 1,634,235 1,447,695 Streets 1,053,123 954,932 - - 1,053,123 954,932 Debt service-interest and issuance costs 316,079 258,663 - - 316,079 258,663 Development and animal control 558,541 619,465 - - 558,541 619,465 Parks 573,249 432,133 - - 573,249 432,133 Fire 753,541 701,282 - - 753,541 701,282 Ambulance 124,155 123,683 - - 124,155 123,683 Water/Sewer/Sanitation - - 6,487,099 5,453,831 6,487,099 5,453,831 6,426,807 5,901,592 6,487,099 5,453,831 12,913,906 11,355,423 Excess(deficiency)of revenues over expenditures before transfers 1,691,693 700,116 539,800 1,085,951 2,231,493 1,786,067 Transfers In(Out) (649) 279,707 649 (279,707) - - Increase in net position 1,691,044 979,823 540,449 806,244 2,231,493 1,786,067 Net position-October l (beginning) 16,002,249 15,109,929 19,436,530 19,058,331 35,438,779 34,168,260 Prior period adjustments (550,064) (87,503) (200,539) (428,045) (750,603) (515,548) Not position-September 30(ending) $ 17,143,229 $ 16,002,249 $ 19,776,440 $ 19,436,530 $ 36,919,669 $ 35,438,779 5 FINANCIAL ANALYSIS OF THE GOVERNMENT-WIDE STATEMENTS Net position of the City's governmental activities increased from $15,452,185 to $17,143,229. Unrestricted net position — the part of net position that can be used to finance day-to-day operations without constraints established by debt covenants, enabling legislation, or other legal requirements is $2,073,139 for governmental activities. FINANCIAL ANALYSIS OF THE CITY'S FUNDS The City's governmental funds(as presented in the balance sheet on page 12) reported a combined fund balance of$4,196,102 compared to $3,586,482 in FY14. This represents an increase of$609,620. The General Fund, Economic Development Corporation, and Community Development Corporation all experienced increases in fund balance for FY15. Revenues and other financing sources for the City's General Fund were $5,332,070, while total expenses and other financing uses were $5,084,178. This resulted in an excess of revenues over expenditures of$247,892 (see page 14). Last year's result was an excess of revenues over expenditures of$429,972.The largest increases in FY15 General Fund revenues came from property taxes and inspection fees. Overall General Fund expenditures increased by $583,745 when compared to FY14. The largest increases in FY15 General Fund expenditures were related to capital outlays and police expenses. General Fund expenditures were $91,851 less than budgeted, while General Fund revenues also experienced a favorable budget variance totaling $218,895. The main reason for the variance in revenues is Inspection fees being under budgeted by$187,925. Revenues for the City's Utility Fund were$6,271,391,while total expenses were $6,487,099. This resulted in a loss before transfers of$215,708 (see page 17). This is worse than 2014's result of income before contributions and transfers of$599,796. One reason for the decrease was a $412,846 increase in other contractual services. North Texas Municipal Water District contract expenses also increased by $218,399. The FY15 unrestricted net position is $595,738. Excluding depreciation expense, this unrestricted net position is equal to approximately 1.79 months of the Utility Fund's 2015 operating expenses. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City's investment in capital assets for all activities as of September 30, 2015 amounts to $55,550,757 compared to $52,602,866 (net of accumulated depreciation) at September 30, 2014. This investment in capital assets includes land, buildings and improvements, street improvements, parks, water and sewer systems, equipment and vehicles. The net increase in the City's investment in capital assets for the current fiscal year was $2,814,264. Some of the major capital asset expenditures during 2015 related to $1.35M of additions to streets and drainage systems. Long-term Debt At year-end, the City had total notes, capital leases, bonds and contractual obligations outstanding of $33,111,122. The City had two new debt issuances totaling $4,060,000 during 2015. The Utility Fund's new Series 2014A Refunding Bonds were issued to partially refund $2,598,000 of bonds from the series 2009 Combination Tax and Revenue Refunding Bonds. The Debt Service Fund's new Series 2014B General Obligation Refunding Bonds were issued to partially refund $990,000 of the Series 2006 Combination Tax and Limited Revenue Certificates of Obligation. The City made all required bond, capital lease, note, and contractual obligation principal payments for 2015. 6 At the end of FY15, the City's total long-term commitments for governmental activities were $6,742,529 and total long-term commitments for the Utility Fund are $26,470,309. Total Iong-term commitments for the City increased by$3,437,562 from 2014 to 2015. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES Since property values stabilized in 2013 following the 2008-2011 housing recession, the City has continued to see healthy increases in the value of existing properties. In 2014 the taxable value of existing properly increased just under 10% from the previous year, and over$37,000,000 in new value was added to the tax roll. Again in 2015,the City saw existing property values increase just over 10% and over$43,000,000 in new value was added the tax roll. We remain cautiously optimistic that we will experience modest, but slowing, appreciation in the value of existing properties and that additional value will be added to the tax roll as a result of new construction in the near term. New value added to the tax role will continue to be primarily from residential growth, however, a new Wal-Mart store slated to begin construction in spring of 2016 will mark a substantial contribution to the growth of our commercial tax base. The City continues to see consistent increases in the amount of sales tax revenue collected each year. Over the past five years, the City has seen an average year-to-year increase in sales tax revenue of about 10%. Sales tax revenue in FY 2015 was up 9% over the FY 2014 revenue. We anticipate that the opening of a new Wal-Mart store in 2017 will impact sales tax revenue. However given the difficulty of predicting consumer behavior as the national economy changes,we will continue to forecast very modest growth in sales tax revenue. The growth in sales tax revenue and the taxable value of real property corresponds to a significant increase in residential growth and population over the past 36 months. According to the most recent population estimates published by the North Central Texas Council of Governments, the City of Anna population as of January 1, 2015 was 10,980. In 2015 the City issued 276 single family building permits which equates to approximately 900 new city residents. As the inventory of finished lots has declined,the City expects that the number of new single family homes will decline slightly from the previous year. The City has forecasted the construction of approximately 200 new single family homes as a factor in the in the FY 16 budget. There are currently seven residential developments under construction that will add 627 single family lots to our inventory over the next 12 to IS months. Of course with the growth in population comes a proportional increase in demand for municipal services that are funded primarily by property taxes. In order to fund the FY 2016 budget, the City adopted a tax rate of $0.639 per$100 valuation which is a decrease from the tax rate adopted in FY 2015. This marks the 2°d year in row that that the City Council has been able to decrease the City property tax rate. When compared with other cities in our area,the City of Anna still has one of lowest per-capita property tax levies. Rapid population growth has also resulted in significant investment over the past 10 to 15 years in the City's water and sewer system. Currently the Water and Sewer Fund holds just over$26.2 million in outstanding debt. The City has worked closely with our financial advisors, First Southwest,to develop a sound debt management plan for the Water and Sewer Fund. Looking to the future, the City anticipates a spike in debt service obligations in 2019. In order to appropriately manage this debt,the City and First Southwest developed a plan to take advantage of call dates and pursue advance refundings of the City's outstanding debt.Every effort has been made to minimize the present value costs to the City. The current plan makes very conservative assumptions regarding interest rates and was reviewed and analyzed in conjunction with a utility rate study to evaluate the current water and sewer rates. Depending on market conditions and the City's growth, two refunding are slated for mid-summer and late fall of 2017. These refundings will also free up cash and reduce pressure on utility rates. 7 In order to ensure that our utility rates will continue to support our operating costs and debt service obligations, the City hires a rate consultant to evaluate our utility system's operation costs and debt payments, and recommend any rate adjustments that would be necessary to fully fund the cost of operating our system while maintaining an adequate financial reserve. While water and sewer rates were unchanged in FY 15, the FY 16 budget included a 9% increase in the water and sewer rates. The primary factors contributing to this rate increase include: 1) Water conservation programs leading to a 23.2% decline over the past few years in the average amount of water sold on a per customer basis; 2) A significant increase in the amount budgeted for North Texas Municipal Water District (NTMWD) wastewater transport and treatment charges; and 3) An increase in the amount budgeted to purchase treated surface water from NTMWD through a contract with the Greater Texoma Utility Authority(GTUA). The City has direct and indirect contracts with the NTMWD for the purchase of treated surface water and for the transport and treatment of wastewater. As our population increases,we will be purchasing more water from NTMWD and sending more of our wastewater into the NTMWD wastewater system. The unprecedented precipitation experienced in the spring of 2015 resulted in significant increase in our costs for transportation and treatment of wastewater. The increase was driven by storm water inflow and infiltration (I&I) introduced into the City's wastewater system and then transported to the NTMWD regional collection system. This increase in flow was not anticipated and the City has worked with NTMWD to arrange for the payment of costs exceeding our FY 15 budget to be paid throughout FY 16. As a result, the City has doubled the budget for NTMWD wastewater transport and treatment charges. Increased demand coupled with the rising cost of treated surface water, and wastewater treatment charges from NTMWD will have a greater impact on the City's utility rate structure as we grow. The City will continue to review its rate structure to determine what, if any, adjustments to the rate structure might be warranted in the coming fiscal years. This evaluation is necessary to ensure that the City is able to meet its outstanding debt obligations and prepare for future capital improvements that will be necessary to maintain utility service to our community The construction of new municipal buildings and other facilities will require significant new capital investment over the next several years. City buildings are currently occupied at near maximum capacity, and the construction of a new city hall and subsequent public safety facilities will be necessary in the near future. With the growth in property and sales tax revenue, we anticipate that a new city hall can be constructed without raising the ad valorem tax rate. As growth continues, we- also anticipate that the City will increase its investment in the construction of new and expanded roadway facilities. CONTACTING THE CITY'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and creditors with a general overview of the City's finances and to show the City's accountability for the money it receives. If you have questions about this report or need additional financial information, contact City Hall, at 111 North Powell Parkway,P.O. Box 776,Anna,Texas 75409-0776 or(972)924-3325. 8 M O m N F l-- O %D N1�0 I d' � N 01 00 N " C� m m ON %D T d' O (7\ 00 r 00 00 W) m M 'd' 00 kn N � in N � 00 � � a1 _ � f 00 M O1 N O 00 CD O �D N N W 00 N rD O 0 u") S O N — N O 00 O OD C N m O 00 N [- � 0 � c7' O •--� O O 00 00 ON vl N M — — N c3' 00 N M N rt' O M M 69 b9 69 QS C � 00 17� kn N M O ko U') Q. 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'6 7T� _ '7 � V T d1 t sa cv d 'a p C G oA T 'tn cz o > C G O v � C 0 i. � j •U ei O i N rn e3 cd C7 ❑ 0Rrr- t) F� F G c:, a City of Anna,Texas Balance Sheet-Governmental Type Funds September 30,2015 Governmental Fund Types Total Other Governmental Assets General Governmental Funds Current assets: Cash and cash equivalents $ 3,220,340 $ 1,138,255 $ 4,358,595 Investments 329,666 - 329,666 Accounts receivable-net 409,291 138,337 547,628 Notes receivable-net - 141,737 141,737 Due from other funds 610,931 40,326 651,257 Total current assets 4,570,228 1,458,655 6,028,883 Liabilities Current liabilities: Accounts payable 142,010 - 142,010 Salaries payable 107,632 - 107,632 Other accrued liabilities 139,672 - I39,672 Construction costs payable 816,875 - 816,875 Due to other funds - 410,734 410,734 Total current liabilities 1,206,189 410,734 1,616,923 Deferred Inflows of Resources Unavailable revenues-property taxes 45,974 8,690 54,664 Unavailable revenues-court 19,457 - 19,457 Unavailable revenues-business loans - 141,737 141,737 Total deferred inflows of resources 65,431 150,427 215,858 Fund Balances Restricted 523,192 1,I00,633 1,623,825 Committed-revenue stabilization 157,476 - 157,476 Unassigned 2,617,940 203,139) 2,414,801 Total fund balances 3,298,608 897,494 4,196,102 Total liabilities,deferred inflows,and fund balances $ 4,570,228 $ 1,458,655 $ 6,028,883 The accompanying notes are an integral part of these financial statements. 12 City of Anna,Texas Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position For the Year Ended September 30, 2015 Fund balances of governmental funds(page 12) $ 4,196,102 Amounts reported for governmental activities in the Statement of Net Position (pages 9-10)are different because: Capital assets used in governmental activities are not financial resources and, therefore,are not reported in the funds. 19,388,284 Accrued interest payable does not require the use of current financial resources and,therefore,are not reported in the governmental funds. (30,025) Net pension liability is not a financial resource;therfore, it is not reported in the governmental funds. (655,971) TMRS contributions are not current financial resources/burden;therefore they are not reported in the governmental funds. The net of these amounts is: 204,805 Unamortized pension investment gains/losses are not current financial resources/burden;therfore they are not reported in the government funds.The net of these amounts is: (111,107) Long-term liabilities,including bonds payable,are not due and payable in the current period and,therefore,are not reported in the funds. (6,086,558) Revenue earned from a CDC long-term receivable is not all due in the current period and,therefore,is deferred in the fund financial statements. 141,737 Property taxes and court revenue not received at year-end are shown as deferred income on the fund financial statements,but the amount should not be shown as a liability on the Statement of Net Position. 74,121 Net position of governmental activities(page 10) $ 17,121,388 The accompanying notes are an integral part of these financial statements. 13 City of Anna,Texas Statement of Revenues,Expenditures, and Changes in Fund Balances - Governmental Funds For the Year Ended September 30,2015 Governmental Fund Types Other Total General Governmental Governmental Revenues Taxes: Property $ 2,790,773 $ 526,744 $ 3,317,517 Sales 736,481 736,616 1,473,097 Franchise 450,799 - 450,799 Building permits 381,318 - 381,318 Inspection fees 187,925 - 187,925 Grants and contributions 15,053 120,896 135,949 Court 115,027 - 115,027 Intergovernmental 114,200 - 114,200 Other revenue 59,958 36,435 96,393 Developer and impact fees 92,012 - 92,012 Other development fees 86,957 - 86,957 Fire 69,826 - 69,826 Parks 63,265 - 63,265 Rentals - 30,000 30,000 Police 25,400 - 25,400 Investment earnings 17,371 6,314 23,685 Total revenues 5,206,365 1,457,005 6,663,370 Expenditures Current: Police 1,370,091 - 1,370,091 Administrative and general 1,042,050 6,954 1,049,004 Fire 688,371 - 688,371 Development and animal control 559,583 - 559,583 Community and economic development - 336,836 336,836 Parks 246,808 - 246,808 Streets 200,188 - 200,188 Court 132,675 - 132,675 Ambulance 124,155 - 124,155 Capital outlays 469,276 286,259 755,535 Debt service: Principal retirement - 466,776 466,776 Interest expense - 200,331 200,331 Total expenditures 4,833,197 1,297,156 6,130,353 Excess of revenues over(under)expenditures 373,168 159,849 533,017 Other financing sources(uses) Sale of capital assets 65,000 - 65,000 Bond Proceeds - 1,462,000 1,462,000 Debt issuance costs - (38,350) (38,350) Debt principal paid to refunding escrow bond - (1,334,000) (1,334,000) Other payments to refunding escrow bond - (77,398) (77,398) Transfers in 60,705 274,429 335,134 Transfers(out) (250,981) (84,802) (335,783) Total other financing sources(uses) (125,276) 201,879 76,603 Net changes in fund balances 247,892 361,728 609,620 Fund balances-beginning 3,050,716 535,766 3,586,482 Fund balances-ending $ 3,298,608 $ 897,494 $ 4,196,102 The accompanying notes are an integral part of these financial statements. 14 City of Anna,Texas Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds To the Statement of Activities For the Year Ended September 30,2015 Amounts reported for governmental activities in the Statement of Activities(page 11)are different because: Net change in fund balances-total governmental funds(page 14) $ 609,620 Governmental funds report capital outlays as expenditures.However, in the Statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense.This is the amount by which depreciation expense exceeded capital outlay expenditures in the current period. (670,051) Governmental funds recogonize the full amount received as revenue for sale of disposed assets,but net book value of the assets are factored in for the government-wide financial statements. (25,840) Governmental funds reports the effects of debt premiums,debt discounts,and deferred losses on refunding when debt is first issued,whereas the amounts are deferred and amortized in the Statement of Activities (128,000) Non-cash capital contributions and other contributions not received within sixty days after year-end are not reported as income in the governmental funds. 1,296,618 Principal payments on long-term debt are an expenditure for the governmental funds,but this expenditure is removed for the government-wide financial statements. 466,776 The decrease in accrued compensated absences does not use current financial resources and,therefore is not reported in the governmental funds. 12,937 Various other reclassifications and eliminations are necessary to convert fi•om the modified accrual basis of accounting to accrual basis of accounting.These include recognizing the change in deferred inflows of resources and various other items.The net effect of these reclassifications is to decrease net position. 128,984 Change in net position of governmental activities(page 11) S 1,691,044 The accompanying notes are an integral part of these financial statements. 15 City of Anna,Texas Statement of Net Position-Proprietary Fund (Utility Fund) September 30,2015 Assets Utility Fund Current assets: Cash and cash equivalents $ 2,300,228 Certificates of deposit 123,884 Accounts receivable-net 461,765 Inventory 26,132 Restricted pooled investments 56,532 Restricted cash for capital improvements 7,943,934 Total current assets 10,912,475 Noncurrent assets: Restricted deposits held in trust with GTUA 2,029,390 Capital assets(non-depreciable): Land and easements 708,016 Construction in progress 732,493 Capital assets(net)plants,machinery,and equipment 33,960,204 Total capital assets 35,400,713 Total noncurrent assets 37,430,103 Total assets 48,342,578 Deferred Outflows of Resources Deferred loss on bond refunding 184,824 Deferred unamortized investment losses 7,661 Deferred TMRS Contributions 71,840 Total Deferred Outflows of Resources 264,325 Total Assets and Deferred Outflows of Resources $ 48,606,903 Liabilities Current liabilities: Accounts payable $ 558,537 Salaries payable 32,235 Other liabilities 28,988 Bond interest payable 796,344 Due to General Fund 200,195 Due to Capital Projects Fund 40,326 Customer deposits 648,704 Accrued compensated absences 15,852 Current portion of long-term debt 745,750 Total current liabilities 3,066,931 Noncurrent liabilities: Bonds and notes payable 25,504,117 Net pension liability 220,442 Total noncurrent liabilities 25,724,559 Total liabilities 28,791,490 Deferred Inflows of Resources Deferred inflows of resources-unamortized investment gains 38,973 Total Liabilites and Deferred Inflows of Resources $ 28,830,463 Net Position Net investment in capital assets 9,150,846 Restricted-GTUA deposits 2,029,390 Restricted-water and sewer improvements 8,000,466 Unrestricted 595,738 Total net position $ 19,776,440 The accompanying notes are an integral part of these financial statements. 16 City of Anna,Texas Statement of Revenues,Expenses,and Changes in Net Position-Proprietary Fund(Utility Fund) For the Year Ended September 30,2015 2015 Operating revenues: Water income $ 2,648,953 Sewer income 1,776,107 Sanitation income 754,181 Developer and impact fees 592,000 Inspection fees 113,237 Connect, install, and tap fees 112,740 Water customer late fees 130,174 Groundwater production fees 50,518 Miscellaneous revenue 16,417 Total operating revenues 6,194,327 Operating expenses: Personnel and benefits 905,496 Sanitation contract 658,561 Supplies,repairs,and maintenance 539,542 N.Texas Municipal Water District contract 526,893 Utilities 420,574 Other contractual services 412,846 Reimbursed developer fees 397,325 Other operating expenses 97,396 Bad debt 28,622 Depreciation 1,326,634 Total operating expenses 5,313,889 Operating income 880,438 Non-operating revenues(expenses): Interest expense (1,111,836) Bond issuance costs (61,374) Interest income 77,064 Total non-operating revenues(expenses) (1,096,146) Income before contributions and transfers (215,708) Contributed capital assets 755,508 Transfers in from Debt Service Fund 84,802 Transfers out to the Capital Projects Fund (84,153) Change in net position 540,449 Total net position-beginning(restated) 19,235,991 Total net position-ending $ 19,776,440 The accompanying notes are an integral pant of these financial statements. 17 City of Anna,Texas Statement of Cash Flows-Proprietary Fund (Utility Fund) For the Year Ended September 30,2015 Operating Activities: 2015 Receipts from customers and users $ 6,313,463 Payments to suppliers (2,753,688) Payments to employees (903,122) Net cash provided(used)by operating activities 2,656,653 Capital and Related Financing Activities: Proceeds from debt issued 2,598,000 Cash paid to escrow agent for debt refunding principal (2,335,000) Other cost paid to escrow agent (201,626) Cash to GTUA reserve accounts (97,731) Cash paid for bond issuance costs (61,374) Cash from restricted capital improvements accounts 1,672,960 Cash paid for acquisition and construction of capital assets (2,155,658) Interest paid on long-term debt (1,106,721) Principal payments on debt (667,000) Net cash provided(used)by capital and related financing activities (2,354,150) Non-capital and Related Financing Activities Transfers in from other funds 84,802 Transfers(out)to other funds (84,153) Net cash provided(used)by non-capital and related financing activities 649 Investing Activities: Interest received 77,064 Net cash provided(used)by investing activities 77,064 Net increase(decrease)in cash and cash equivalents 380,216 Cash and cash equivalents,October 1 1,920,012 Cash and cash equivalents,September 30 $ 2,300,228 Reconciliation of Operating Income to Net Cash Provided (Used)by Operating Activities: Operating income(loss) $ 880,438 Adjustments to reconcile operating income to net cash provided(used) by operating activities: Depreciation expense 1,326 634 Bad debt expense 28,622 Decrease(increase)in accounts receivable 80,786 Decrease(increase)in inventory 203,692 Increase(decrease) in due to General Fund (1,600) Increase(decrease)in accounts payable 79,247 Increase(decrease)in other liabilities 18,110 Increase(decrease)in customer deposits 38,350 Increase(decrease)in accrued compensated absences 2,374 Net cash provided by operating activities $ 2,656,653 Non-cash capital activities: Contributions of capital assets $ 755,508 The accompanying notes are an integral part of these financial statements. 18 CITY OF ANNA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2015 NOTE A- SUMMARY OF ACCOUNTING POLICIES The City of Anna,Texas (the "City") is a Home Rule Charter city that operates under a Council-Manager form of government.The City provides the following services:public safety,ambulance,streets,sanitation, planning and zoning, and general administrative services. Other services include water, sewer, and sanitation operations. The financial statements of the City of Anna are prepared in accordance with Generally Accepted Accounting Principles(GAAP). The City's reporting entity applies all relevant Governmental Accounting Standards Board(GASB)pronouncements. Proprietary funds and similar component units apply Financial Accounting Standards Board(FASB)pronouncements.The following is a summary of the more significant policies: 1. The ReportingEntity The accompanying financial statements present all funds relevant to the operations of the City and its component units as defined by GASB Statement 61: The Financial Reporting Entity: Omnibus an amendment to of GASB Statements 14 and 34. Component units are fiscally dependent upon the City and there is potential for a financial burden or benefit relationship. Based on the criterion stated above,the Anna Community Development Corporation("CDC")and the Anna Economic Development Corporation ("EDC") are component units of the City. The CDC and EDC are nonprofit organizations established to act on behalf of the City of Anna under the Development Corporation Act of 1979,section 4B and 4A,respectively.Both component units are considered special revenue funds of the City and are presented as blended governmental-type funds.The blended methodology was selected after evaluation of the"substantively the same"and financial burden or benefit relationship criteria.It should be noted that when the blended method is used,transactions of the component unit are presented as if they were executed directly by the primary government. 2. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e. the Statement of Net Position and the Statement of Activities) report information on all the non-fiduciary activities of the primary government and its component units. Governmental activities, which normally are supported by taxes and intergovernmental revenues,are reported separately from business-type activities,which rely to a significant extent on fees and charges for support.Likewise,the primary government is reported separately from certain legally separate component units for which the City is financially accountable. The Statement of Activities demonstrates the degree to which direct expenses of a given function or segment is offset by program revenues.Direct expenses are those that are clearly identifiable with a specific function or segment.Program revenues include: 1)charges to customers or applicants who purchase,use,or directly benefit from goods, services, or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes or other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. 19 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Major individual governmental funds are required to be reported in separate columns in the fund financial statements. 3. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recognized when earned and expenses are recognized when a liability is incurred,regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue when all of the eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they become both measurable and available as net current assets. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period.For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal year. Gross receipts and sales taxes are considered measurable when in the hands of intermediary collecting govermnent and are recognized as revenue at that time. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. Exceptions to this general rule include; (1) accumulated unpaid vacation, sick pay, and other employee amounts which are not accrued; and (2) principal and interest on general long-term debt which are recognized when due. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations.All revenues not meeting this definition are reported as non-operating revenues and expenses. All proprietary funds are accounted for using the accrual basis of accounting. Their revenues are recognized when they are earned, and their expenses are recognized when they are incurred. Unbilled utility services receivables related to water,wastewater,and sanitation services are recorded at year-end. When both restricted and unrestricted resources are available for use,it is the City's policy to use restricted funds first,then unrestricted resources as they are needed. 4. Fund Accounting The accounts of the City are organized on the basis of funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing accounts, which are comprised of each fund's assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. Government resources are allocated to and for individual fiinds based on the purposes for which they are to be spent and the means by which spending activities are controlled. The City,for financial purposes,includes all of the funds relevant to the operations of the City of Anna.Funds designated as"major"funds for the City each year are considered particularly important due to the level of activity in these funds. The General Fund is always considered a major fund for the City.For 2015,the Utility Fund is also a major fund. The various funds are grouped,in the financial statements in this report, into two fiend categories as follows: 20 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) GOVERNMENTAL FUND TYPES General Fund The General Fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. Debt Service Fund Accounts for the resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds. Capital Projects Fund Accounts for the acquisition and construction of governmental-type assets from expenditures of debt proceeds, capital grants, or other sources restricted for governmental type asset acquisition. Special Revenue Funds The Anna CDC is a special revenue fund that accounts for the accumulation of State of Texas 4A sales tax revenues and related community development expenditures. The Anna EDC is a special revenue fund that accounts for the accumulation of State of Texas 4B sales tax revenues and related economic development expenditures. PROPRIETARY FUND TYPES Utility Fund Accounts for operations (a) that are financed and operated in a manner similar to private business enterprises-where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges or(b)where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control,accountability,or other purposes.The Utility Fund accounts for the water,sewer,and sanitation services provided by the City. 5. Cash and Cash Equivalents For purposes of the statement of cash flows,the City considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents.Other deposits with longer maturities are classified as investments. 6. Inventory City inventory is maintained for water meters and other supplies in the Utility Fund.Inventory is recorded at cost with value adjusted on the first in, first out methodology. 7. Capital Assets Property,plant and equipment used in governmental fund type operations are shown on the Statement of Net Position,rather than governmental funds.The City has a$5,000 capitalization threshold for capital assets. 21 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) All property,plant and equipment are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated property,plant and equipment are valued at their estimated fair value on the date donated. Depreciation is provided in the enterprise funds in amounts sufficient to relate the cost of the depreciable assets to operations over their estimated service lives on the straight-line basis. The service lives by type of asset are follows: Depreciable Asset Category Life in Years Buildings 20 Water&Sewer System infrastructure 35 Equipment 3-20 Streets 20 8. Long Term Liabilities Long-tern liabilities expected to be financed from governmental fund types are shown on the Statement of Net Position, rather than governmental funds. Principal payments for this debt are expensed on the fund financial statement, but this expense is removed for the government-wide statement of activities. 9. Due To and From Funds Outstanding balances between funds at the end of the fiscal year are referred to as either"due to/from other funds".Any residual balances between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances". 10. Compensated Absences It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. There is no liability for unpaid accumulated sick leave since the City will not pay any unused amounts when employees separate from service with the City. Vacation pay is accrued in the government-wide and proprietary financial statements. 11. Fund Balances The City has adopted Governmental Accounting Standards Board(GASB)Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions(GASB 54).This Statement defines the different types of fund balances that a governmental entity must use for financial reporting purposes in the fund financial statements for governmental type funds.It does not apply for the government-wide financial statements or proprietary type funds. GASB 54 requires the fund balance amounts to be properly reported within one of the following fund balance categories: Nonspendable - such as fund balance associated with inventories, prepaids, long-term loans and notes receivable, and property held for resale (unless the proceeds are restricted, committed, or assigned). Restricted - fund balance category includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource providers, or through enabling legislation, 22 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Committed- fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the City Council (the City's highest level of decision-making authority), Assigned-fund balance classification authorized for City Manager use to be used for specific purposes but do not meet the criteria to be classified as restricted or committed, and Unassigned-fund balance is the residual classification for the government's General Fund and includes all spendable amounts not contained in the other classifications, and other funds that have total negative fund balances. 12. Budget and Budgetary Accounting The official city budget is prepared for adoption for the Governmental Fund Type and the Proprietary Fund Type during the month of September. 13. Revenue Recognition---Property taxes Property taxes attach as an enforceable lien on property as of January 1. Taxes are levied on October 1 and are due and payable at that time. All unpaid taxes levied October 1 become delinquent February 1 of the following year. Property tax revenues are recognized when they become available.Available includes those property tax receivables expected to be collected within sixty days after year-end. NOTE B - CASH, CASH EQUIVALENTS,AND POOLED INVESTMENTS As of September 30,2015,the City maintains banking accounts at Texas Star Bank,Independent Bank,and the state-operated Texpool system.The City's investments are limited to demand deposits and certificates of deposits in financial institutions that are members of the FDIC. At September 30, 2015, City's deposits held in its depository banks totaled $15,546,170 with $997,767 insured by the Federal Deposit Insurance Corporation. Securities have been pledged in the City's name by the depository banks to collateralize 100% of all remaining deposits. Summary of deposits with financial institutions: Primary government cash and cash equivalents $ 4,706,716 Primary government investments 2,181,313 Restricted cash 8,658,141 Deposits with financial institutions 15,546,170 Add: petty cash 1,860 Total primary government cash and other deposits $ 15,548,030 The Texas State Comptroller of Public Accounts exercises oversight responsibility over TexPool (pooled investments). Oversight includes the ability to significantly influence operations, designations of management and accountability for fiscal matters. Additionally,the State Comptroller has established an advisory board composed of both participants in TexPool and other persons who do not have a business relationship with TexPool. The Advisory Board members review the investment policy and management fee structure. Standard and Poor's rates TexPool at AAAm. 23 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) To maintain the rating, weekly portfolio information must be submitted to Standard and Poor's and the office of the Comptroller of Public Accounts for review.TexPool operates in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. TexPool uses amortized cost rather than the market value to report net assets to compute share prices. Accordingly, the fair value of the position in TexPool is the same as the value of TexPool shares. The City's pooled investments at September 30, 2015, are comprised of governmental investment pools in the Texas Local Government Investment Pool (TexPool) as follows: Carrying Amount &Fair Value Public fund investmentpools: TexPool General Account $ 205,782 TexPool Sewer Capital Irnprovement Fund 56,532 Total public funds investment pools: $ 262,314 Custodial credit risk Custodial credit risk is the risk that in the event of a bank failure,the City's deposits may not be returned to it.The City's investment policy requires collateralization of certificates of deposit or demand deposits,to be held by an independent safekeeping agent. The safekeeping bank may not be within the same holding company as the banks from with the securities are pledged.City deposits over and above amounts insured by the Federal Deposit Insurance Corporation (FDIC) are collateralized by securities held by the City's safekeeping agent. Interest rate risk Through its investment policy,the City manages its exposure to fair value losses arising from increasing interest rates by limiting the duration of investments within its investment portfolio to a maturity period no greater than three years for the Debt Service Fund, no greater than the final expenditure date for bond proceeds held in a Capital Projects Funds, and no greater than 270 days for all other funds. Credit risk Credit risk is the risk that an issuer or other counterparty to an investment will not fiilfill its obligations. According to the City's investment policy,to mitigate credit risk, funds shall be invested in the following types of investments: 1) state or local investment pools 2) direct obligations of the U.S. government 3) bonds with maturities less than two years and guaranteed by the U.S.government 4)certificates of deposits with maturities less than two years 5)repurchase agreements collateralized with U.S.treasury securities with terms less than 90 days 6) SEC registered, AM-rated money market mutual funds with a dollar-weighted average portfolio maturity of 90 days or less,and 7)fixed rate or discount notes with a maturity of two years or less pledged or otherwise guaranteed by any of the following federal agencies:Federal National Mortgage Association, Federal Home Loan Bank, Federal Farm Credit Bank, Student Loan Marketing Association, and the Federal Home Loan Mortgage Corporation. 24 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Concentration of credit risk Concentration of credit risk is the risk of loss attributed to the magnitude of investment in a single issuer. The City investment policy requires investment funds to be fully collateralized. NOTE C—PROPERTY TAX REVENUE Property and personal taxes are billed and collected by the Collin County Tax As The total property tax levy for the 2014/2015 tax year was$3,291,889.At September 3 0,2015,$3,290,905 of the tax has been collected, which is 99.97%. Ad valorem taxes are levied from valuations assessed as of January 1 and recognized as revenue on the date of the levy on October 1. Property tax receivables are recognized when the City has an enforceable claim against the property owner. in the governmental funds, property tax revenue is recognized in the fiscal period for which the taxes are levied, provided that they become available. Available means collected within the current period,or expected to be collected soon enough thereafter,to be used to pay current liabilities. The City's availability period is sixty days. Taxes collected prior to the levy date to which they apply are recorded as deferred inflows of resources and recognized as revenue of the period to which they apply. Current taxes are levied by October 1 and become delinquent if unpaid on February 1. Taxes unpaid as of February I are subject to penalty and interest as the City Council provides by ordinance.The penalty is 6% for the first month, and increased 1% per month up to a 12% maximum. Under state law, property taxes levied on real property constitutes a lien on the real property which cannot be forgiven without specific approval of the state legislature. NOTE D -RECEIVABLES Receivables at September 30, 2015, consisted of the following: Primary Government Other Governmental- Proprietary General Fund Type Funds Fund Property tax $ 45,974 $ 8,691 $ - Sales tax 129,645 129,646 - Franchise fees 92,820 - - Court fines 561,460 - - Loans(long-term) - 141,737 - Utility bills - - 598,228 Other 111,411 - - Gross receivables 941,310 280,074 598,228 Less: Allowance for uncollectibles (532,019) - (136,463) Net receivables $ 409,291 $ 280,074 $ 461,765 25 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTE E-CAPITAL ASSETS GOVERNMENTAL FUND TYPE ACTIVITIES Governmental fund type capital asset activity for the year ended September 30, 2015 was as follows: Retirements, Beginning Transfers, and Balance Additions Reclassifications Ending Balance Nondepreciable assets: Land $ 2,039,210 $ 138,666 $ - $ 2,177,876 Construction in progress 437,057 69,052 (437,056) 69,053 Depreciable assets: Park improvements 5,355,204 54,879 437,056 5,847,139 Buildings 1,483,499 92,810 - 1,576,309 Furniture and fixtures 219,196 85,810 - 305,006 Streets and drainage 16,076,076 1,353,862 - 17,429,938 Machinery and equipment 2,202,455 257,077 (77,205) 2,382,327 Totals at historical cost 27,812,697 2,052,156 (77,205) 29,787,648 Less: Accumulated depreciation (9,025,140) (1,425,588) 51,364 (10,399,364) Governmental fund type capital assets,net $ 18,787,557 $ 626,568 $ (25,841) $ 19,388,284 PROPRIETARY FUND TYPE ACTIVITIES Proprietary fund type capital asset activity for the year ended September 30, 2015 was as fellows: Retirements, Beginning Transfers,and Balance Additions Reclassifications Ending Balance Nondepreciable assets: Land and easements $ 411,068 $ 296,948 $ - $ 708,016 Construction in progress 3,423,222 643,110 (3,333,839) 732,493 Depreciable assets: Furniture 5,620 - - 5,620 Buildings and improvements 486,244 - - 486,244 Equipment 1,349,770 42,956 - 1,392,726 Water treatment system 5,994,665 1,034,221 825,121 7,854,007 GTUA water improvements 16,979,634 366 (366) 16,979,634 GTUA sewer improvements 939,796 - - 939,796 Water and sewer system 13,617,049 894,813 2,508,718 17,020,580 Totals at historical cost 43,207,068 2,912,414 (366) 46,119,116 Less: Accumulated depreciation (9,391,769) (1,326,634) - (10,718,403) Proprietary fund type activities capital assets, net $ 33,815,299 $ 1,585,780 $ (366) $ 35,400,713 26 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Depreciation for general fixed assets is included as an expense for governmental activities on the Statement of Activities.Depreciation for proprietary type funds are included in both the fluid financial statements and on the Statement of Activities. Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: Streets $ 852,935 Parks 326,879 Police 135,762 General government 24,985 Fire 66,698 Economic development 18,329 Total depreciation expense-governmental activities $ 1,425,588 Business-type activities: Water and sewer $ 1,326,634 Total depreciation expense-business-type activities $ 1,326,634 NOTE F-LONG-TERM DEBT The City has outstanding general obligation bonds, revenue bonds, notes payable, capital leases, and certificates of obligation for the acquisition of capital assets and the construction of major capital facilities. The following is a schedule of future debt service requirements to maturity: Total Governmental Activities Business-Type Activities Fiscal Year Ended Principal Interest Principal Interest Principal Interest 2016 $ 1,207,903 $ 1,212,408 $ 462,153 $ 195,20I $ 745,750 $ 1,017,206 2017 1,199,236 1,163,918 426,736 186,501 772,500 977,417 2018 1,150,724 1,306,997 407,474 214,662 743,250 1,092,335 2019 1,438,462 1,531,601 439,712 273,326 998,750 1,258,275 2020 1,859,799 1,483,952 413,549 283,543 1,446,250 1,200,409 2021-2025 10,268,718 5,787,059 2,231,218 1,044,595 8,037,500 4,742,464 2026-2030 8,952,250 2,355,613 1,334,000 314,350 7,618,250 2,041,263 2031-2035 5,037,500 723,975 270,000 8,906 4,767,500 715,069 2036-2040 1,036,250 171,799 - - 1,036,250 171,799 $ 32,150,842 $ 15,737,322 $ 5,984,842 $ 2,521,084 $ 26,166,000 $ 13,216,238 27 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) The following is a summary of the terms of the City's long-term debt at September 30, 2015: Governmental Activities: Balance Original Year of Final September 30, Due Within Purpose Amount Issue Maturity Interest Rate 2015 One Year 2006 Combination Tax and Limited Surplus Revenue Certificates of $ 2,480,000 2005 2/15/2026 3.59/6-5.25% $ 650,000 $ 120,000 Obligation 2007 Certificate of Obligation 1,420,000 2007 2/15/2027 3.95%to 15% 795,000 95,000 2007 Revenue Bond 370,000 2007 2/15/2027 3.95%to 15% 205,000 25,000 2009 Tax and Revenue Certificate of 900,000 2009 2/15/2026 4.28%(to 15% 720,000 40,000 Obligation on 02/15/2018) Series 2014E General Obligation 1,462,000 2014 2/15/2026 .3%-2,395% 1,410,000 27,000 Refunding Bond EDC-Note payable 335,000 2012 11/14/2021 4.465% 223,876 32,255 EDC-Note payable 380,300 2008 2018 5% 166,966 40,898 CDC-Sales Tax Revenue Refunding 204,000 67,000 Bonds-Series 2012A 396,000 2012 2/15/2018 3.25% CDC-Sales Tax Revenue Bonds- 1,610,000 15,000 Series 2012B $ 1,655,000 2012 2032 3.30% Compensated absences 101,716 101,716 Total Governmental Activities $ 6,086,558 $ 563,869 Business-Type Activities: Balance Original Year of Final September 30, Due Within Purpose Amount Issue Maturity Interest Rate 2015 One Year 1976 General Obligation Water Bonds 100,000 1976 9/30/2016 5% $ 5,000 $ 5,000 2005 GTUA contract 2,885,000 2005 5/1/2028 4.42% 1,990,000 95,000 Series 2006 GTUA contract revenue bonds(12&15) 2,125,000 2006 6/1/2026 2.95%-3.75% 1,355,000 100,000 Series 2007 GTUA contract revenue bonds 760,000 2007 5/1/2027 3.07%-5.57% 555,000 35,000 2007 GTUA contract 1,105,000 2007 5/1/2027 3.07%-5.57% 820,000 50,000 2007 GTUA contract 2,325,000 2007 6/1/2028 2.95%-4.1% 1,710,000 105,000 2007 GTUA contract 3,365,000 2007 5/1/2032 3.07%-5.62% 3,110,000 50,000 2008 GTUA contract 540,000 2008 9/30/2027 2.29%-5.74% 395,000 25,000 CGMA Pipeline Project Phase 1 700,000 2008 10/1/2028 2.29%-5.74% 488,750 26,250 COMA Pipeline Project Phase 1I 2,168,750 2008 9/30/2040 5.68%-5.83 2,168,750 - CGMA Pipeline Project Phase 111 1,250,000 2008 10/1/2036 2.67%-5.62% 1,007,500 52,500 2009 combination tax and revenue 4.28%(to 15% refunding bond 4,165,000 2009 2/15/2026 on 02/1512018) 1,705,000 - 2012 combination tax and revenue certificates of obligation 4,210,000 2013 2/15/2033 1.5%-2.5% 4,130,000 80,000 2014 combination tax and revenue certificates of obligation $ 4,180,000 2014 2/15/2034 2.0%-3.65% 4,180,000 70,000 Series 2014A refunding bonds $ 2,598,000 2014 2/15/2026 2.11% 2,546,000 52,000 Bond premiums various various various n/a 83,867 - Total Business-Type Activities 26,249,867 745,750 Total general debt(Governmental Type and Business-Type Activities) $ 32,336,425 $ 1,309,619 28 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Beginning Due Within Balance Additions Reductions Ending Balance One Year Governmental activities: 2006 Combination Tax and Limited Surplus Revenue Certificates of Obligation $ 1,755,000 $ - $ (1,105,000) $ 650,000 $ 120,000 2007 Certificate of Obligation 885,000 - (90,000) 795,000 95,000 2007 Revenue Bond 230,000 - (25,000) 205,000 25,000 2011 Public Property Finance Act Certificates of Obligation 344,000 - (344,000) - - Series 2014B General Obligation Regunding Bond - 1,462,000 (52,000) 1,410,000 27,000 EDC-FY12 Bank note payable-4.465%a.p.r. Matures 11/14/2021 -Original issue-$335,000 254,724 - (30,848) 223,876 32,255 EDC-FY08 Bank note payable-5%a.p.r.- Matures 2019-Original amount was$380,300 205,894 - (38,928) 166,966 40,898 2009 Tax and Revenue Certificate of Obligation 755,000 - (35,000) 720,000 40,000 CDC-Sales Tax Revenue Refunding Bonds-Series 2012A 269,000 - (65,000) 204,000 67,000 CDC Sales Tax Revenue Bonds-Series 2012B 1,625,000 - (15,000) 1,610,000 15,000 Other liabilities _ 114,653 - (12,937) 101,716 101,716 Total Governmental activity long term liabilities $ 6,438,271 $ 1,462,000 $ (1,813,713) $ 6,086,558 $ 563,869 Beginning Due Within Balance Additions Reductions Ending Balance One Year Business-type activities: 1976 General Obligation Water Bonds $ 10,000 $ - $ (5,000) $ 5,000 $ 5,000 2005 GTUA contract 2,085,000 - (95,000) 1,990,000 95,000 Series 2006 GTUA contract revenue bonds(12&15) 1,455,000 - (100,000) 1,355,000 100,000 Series 2007 GTUA contract revenue bonds 590,000 - (35,000) 555,000 35,000 2007 GTUA contract 870,000 - (50,000) 820,000 50,000 2007 GTUA contract 1,810,000 - (100,000) 1,710,000 105,000 2007 GTUA contract 3,160,000 - (50,000) 3,110,000 50,000 2008 GTUA contract 420,000 - (25,000) 395,000 25,000 CDMA Pipeline Project Phase 1 513,750 - (25,000) 488,750 26,250 CGMA Pipeline Project Phase 11 2,168,750 - - 2,168,750 - CGMA Pipeline Project Phase 111 1,057,500 - (50,000) 1,007,500 52,500 2009 combination tax and revenue refunding bond 4,040,000 - (2,335,000) 1,705,000 - 2012 combination tax and revenue certificates of obligation 4,210,000 - (80,000) 4,130,000 80,000 2014 combination tax and revenue certificates of obligation 4,180,000 - - 4,180,000 70,000 Series 2014A refunding bonds - 2,598,000 (52,000) 2,546,000 52,000 Bond premiums 83,867 - - 83,867 - Total business-type activities longterm liabilities $ 26,653,867 $ 2,598,000 $ (3,002,000) $ 26,249,867 $ 745,750 29 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) CONTRACTUAL OBLIGATIONS WITH GREATER TEXOMA UTILITY AUTHORITY Under the terms of long term water supply and sewer service contracts between the City and Greater Texoma Utility Authority(GTUA),the City recognizes that GTUA has an undivided ownership interest in the City's water system and sewer collection and treatment facility equivalent to the percentage of the total cost of the facility provided by GTUA through the issuance of GTUA bonds. The City has a contractual obligation to make payments specified by the contract to GTUA to pay the principal and interest on the bonds,maintain a Reserve Fund for the security and payment of bonds similarly secured,pay the administrative and overhead expenses of GTUA directly attributable to the bonds,and pay any extraordinary expenses incurred by GTUA in connection with the bonds. Under terms of the contracts the City's obligation to make payments to GTUA, as well as GTUA's ownership interest in the facilities terminates, when all of GTUA's bonds issued in connection with construction of the facilities have been paid in full, are retired, and are no longer outstanding. Collin Grayson Municipal Alliance Transmission Water Pipeline In 2004,the City,along with the City of Van Alstyne,Howe,and Melissa,formed a group called the Collin Grayson Municipal Alliance("CGMA").CGMA entered into a long-term contractual obligation with GTUA for the purpose of providing funds for the construction of a transmission water pipeline that will provide water to CGMA cities. The cost of the pipeline is being funded in four phases. Each CMGA city was required to make payments to GTUA in an amount equivalent to 25% of the total obligation to cover their portion of the cost of the obligation until the pipeline project was completed. As water continues to flow to each CGMA city, the City shall be charged it's percentage or fraction share of debt service on the obligation based upon: the amount of water to be paid by the City under its water contract(i.e.the greater of its minimum take-or-pay amount or the actual amount of water taken)divided by the total amount of water to be paid by all CGMA cities. The sum of the four(4) fractional amounts shall always equal 100%of the debt service on the contractual obligation with GTUA. The billing rates for each City will be calculated to provide funds necessary to cover the contractual obligation, interest, repairs, maintenance, and production costs. At the end of the contractual obligation with GTUA, the City will own an undivided interest in the transmission water pipeline based on the percentage of water it utilized and paid for during the contract term. The contract will expire and the transfer of ownership will occur during the fiscal year ended September 30, 2040, as long as no new debt is issued. CDC Series 2012A Sales Tax Revenue Refunding Bonds On August 23,2012, Series 2012A Sales Tax Revenue Refunding Bonds were obtained by the CDC in the amount of$396,000. $377,983 of the proceeds from the sale of the bonds were used to refund the CDC's outstanding Texas Leverage Fund Loan in order to restructure such indebtedness.The issuance's net present value has the CDC incurring $3,382 of additional costs after paying all issuance and other costs on the Bonds. The refunded loan and interest due thereon, are to be paid from funds deposited with the Escrow Agent.The entire refunded loan principal was redeemed on August 23,2012.Debt service for the sales tax revenue bonds will be funded from pledged state tax revenue. 30 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) CDC Series 2012B Sales Tax Revenue Bonds On August 23,2012, Series 2012B Sales Tax Revenue Bonds were obtained by the CDC in the amount of $1,655,000.Proceeds from the sale of the bonds are to be used for City of Anna parks and other open space improvements.Debt service for the sales tax revenue bonds will be funded from the pledge of net revenue to be received from the State of Texas sales taxes received by the CDC. Series 2012, $4,210,000 Combination Tax and Revenue Certificates of Obligation Dated December 20, 2012, these proprietary fund certificates of obligation were issued to fund water and sewer system improvements. Proceeds of the debt are recorded in, and expended by the Capital Projects Fund.This twenty-year debt has interest rates of 1.5%to 2.5%that will be paid each February and August 15th.Average yield is 2.24%. Principal is paid every February 15th.The debt is to be repaid with Utility Fund revenues. Final maturity is on February 15, 2033. Series 2014, $4,180,000 Combination Tax and Revenue Certificates of Obligation Dated February 27, 2014, these proprietary fund certificates of obligation were issued to fund water and sewer system improvements. This twenty- year debt has interest rates of 2.0% to 3.65%that will be paid each February and August 15th. Principal is paid every February 15th. The debt is to be repaid with Utility Fund revenues. Final maturity is on February 15, 2034, Series 2014A, $2,598,000 Combination Tax and Revenue Refunding Bonds Dated October 28, 2014, these Utility Fund certificates of obligation were issued to partially refund $2,598,000 of bonds from the Series 2009 Combination Tax and Revenue Refunding Bonds("Series 2009"). This ten-year debt has interest rates of 0.3% to 2.395% that will be paid each February and August 15th Principal is paid every February 15Eh. The debt is to be repaid with Utility Fund revenue. Final maturity is on February 15, 2016. Series 2014B, $1,462,000 General Obligation Refunding Bonds Dated October 28,2014,this governmental-type refunding bonds were issued to partially refund$990,000 of the Series 2006 Combination Tax and Limited Surplus Revenue Certificates of Obligation ("Series 2006 C.O.'s").This ten-year debt has interest rates of 0.3%to 2.395%that will be paid each February and August 15th Principal is paid every February 15th The debt is to be repaid with governmental revenue. Final maturity is on February 15, 2016. 31 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTE G—PRIOR PERIOD ADJUSTMENTS The City had the following restatements to net position: Governmental Government-wide effects Activities Net Position-beginning as previously reported $ 16,002,249 Prior period adjustment-Deferred outflows for TMRS contributions 144,779 Prior period adjustment-Net pension liability per GASB 68 (694,843) Net Position-beginning as adjusted $ 15,452,185 Proprietary Fund Types Utility Fund Net Position-beginning $ 19,436,530 Prior period adjustment-Deferred outflows for TMRS contributions 51,894 Prior period adjustment-Net pension liability per GASB 68 (252,433) Net Position-beginning as adjusted $ 19,235,991 NOTE H—FUND BALANCES AND RESTRICTED NET POSITION Governmental-Type FundBalances The City authorized the City Administrator to designate certain fund balances as assigned. Excluding unassigned fund balances,the following describes the City's fund balance classifications at September 30, 2015: Restricted Fund Balances All fund balances in spendable form for the Capital Projects,Debt Service,and Special Revenue funds are restricted for the intended purpose of these funds. Restricted Fund Balances of$523,192 for the General Fund represents assets restricted by law or by agreements with third parties. 32 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) The following describes the various fund balance restrictions for the General Fund: Impact fees for park improvements $ 277,874 Eastside Park improvements 12,645 Fire Department improvements 76,347 State Seizure funds held in trust 17,878 Impact fees for street improvements 66,606 Public Education Government Fees 40,083 Child safety programs 3,917 Municipal court building security 14,962 Court bond funds held in trust 5,677 Municipal court technology 4,411 Sweetwater Crossing funds held in trust 463 Law enforcement officer training fund 2,329 $ 523,192 Committed Fund Balances The City Council has committed$157,476 of General Fund fund balance for 2016 revenue stabilization in the event of budget shortfalls. This contingency amount must be expended in accordance with Section 7.08 of the Anila City Charter. Negative Fund Balances The Capital Projects Fund has a negative$158,974 fiend balance and the Debt Service Fund has a$44,165 negative fund balance at September 30, 2015. The City's annual budget is adopted and amended as necessary to ensure any negative fiord balances are only temporary in nature. The City expects both fund balances to become positive during fiscal year 2016 with reimbursement made to them by other fields and/or third parties. Proprietary Fund Net Position Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the City or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. 33 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) At September 30, 2015,the City's proprietary fund net position was restricted for the following purposes: • The Utility Fund has restricted deposits held in trust by GTUA in the amount of$2,029,390 that will be used for water and sewer system capital improvements and repayment of contractual obligations. • The Utility Fund has restricted net position in the form of cash deposits,pooled investments,and due from other fund balances totaling $8,000,466 that will be used for water and sewer system capital improvements and debt service related to such improvements. The balance is comprised of the following Statement of Net Position balances: Restricted pooled investments $ 56,532 Restricted cash for capital improvements 3,317,598 Special purpose operating account 4,626,336 $ 8,000,466 NOTE I—INTERFUND RECEIVABLES, PAYABLES,AND TRANSFERS Interfund balances at September 30, 2015 are as follows: Receivable Fund Payable Fund Amount Purpose General Utility $ 200,195 For services earned/paid on behalf of other fund. General Capital Projects $ 355,884 For services earned/paid on behalf of other fund. General Debt Service $ 54,850 For services earned/paid on behalf of other fund. Capital Projects Utility $ 40,328 For services earned/paid on behalf of other fund. The net internal balances between governmental and proprietary type funds presented above is $240,523. Interfund transfers during fiscal year 2015 are as follows: Transfer In Fund Transfer Out Fund Amount Purpose Capital Projects General $ 190,277 To transfer cash for capital projects. Utility Debt Service $ 84,153 To support I&S payments. Capital Projects Utility $ 84,153 To support future capital facility needs of the City. Utility Debt Service $ 65,312 To support I&S payments. Capital Projects Utility $ 65,312 To support future capital facility needs of the City. Utility Debt Service $ 19,490 To support I&S payments. Capital Projects Utility $ 19,490 To support future capital facility needs of the City. 34 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) NOTE J—RISK MANAGEMENT The City is exposed to various risks of loss related to litigation, theft, property damage, errors and omissions, injuries, and natural disasters. The City's insurance is by membership in the Texas Municipal League, a public entity risk pool operated by the Texas Municipal League Board for the benefit of governmental units in Texas.Insurance in effect at September 30,2015 is summarized as follows:Workers compensation,general liability,automobile liability,personal property,law enforcement liability,and errors and omissions.There were no settlements in excess of the insurance coverage in any of the three prior fiscal years. NOTE K—PENSION PLAN A. Plan Description The City of Anna participates as one of 860 plans in the nontraditional,joint contributory, hybrid defined benefit pension plan administered by the Texas Municipal Retirement System (TMRS). TMRS is an agency created by the State of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code (the TMRS Act) as an agent multiple-employer retirement system for municipal employees in the State of Texas. The TMRS Act places the general administration and management of the System with a six-member Board of Trustees. Although the Governor, with the advice and consent of the Senate, appoints the Board, TMRS is not fiscally dependent on the State of Texas. TMRS's defined benefit pension plan is a tax-qualified plan under Section 401 (a) of the Internal Revenue Code. TMRS issues a publicly available comprehensive annual financial report (CAFR)that can be obtained at www.tmrs.com. All eligible employees of the city are required to participate in TMRS. B. Benefits Provided TMRS provides retirement, disability, and death benefits. Benefit provisions are adopted by the governing body of the city, within the options available in the state statutes governing TMRS. At retirement,the benefit is calculated as if the sum of the employee's contributions, with interest, and the city-financed monetary credits with interest were used to purchase an annuity.Members may choose to receive their retirement benefit in one of seven payments options. Members may also choose to receive a portion of their benefit as a Partial Lump Sum Distribution in an amount equal to 12, 24, or 36 monthly payments, which cannot exceed 75% of the member's deposits and interest. 35 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) The plan provisions are adopted by the governing body of the City,within the options available in the state statutes governing TMRS. Plan provisions for the City were as follows: Employee deposit rate 7 Matching ratio(City to employee) 2-1 Years required for vesting 5 years of service Service retirement eligibility Minimum age 60 with 5 years of service Any age with 20 years of service Updated service credits 0% Annuity increase(to retirees) 0%of CPI Employees covered by benefit terms At the December 31,2014 valuation and measurement date,the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 3 Inactive employees entitled to but not yet receiving benefits 15 Active employees 44 Total 62 C. Contributions The contribution rates for employees in TMRS are either 5%,6%,or 7%of employee gross earnings, and the city matching percentages are either 100%, 150%,or 200%,both as adopted by the governing body of the city. Under the state law governing TMRS, the contribution rate for each city is determined annually by the actuary,using the Entry Age Normal(EAN)actuarial cost method. The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees for the City were required to contribute 7%of their annual gross earnings during the fiscal year. The contribution rates for the City were 10.49%and 11.11%in calendar years 2014 and 2015, respectively. The City's contributions to TMRS for the year ended September 30, 2015, were $322,913, and were equal to the required contributions. D. Net Pension Liability The City's Net Pension Liability (NPL) was measured as of December 31, 2014, and the Total Pension Liability(TPL)used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. Actuarial assumptions: The Total Pension Liability in the December 31,2014 actuarial valuation was determined using the following actuarial assumptions: 36 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Inflation 3.0%per year Overall payroll growth 3.0%per year Investment Rate of Return 7.0%, net of pension plan investment expense, including inflation Salary increases were based on a service-related table.Mortality rates for active members,retirees, and beneficiaries were based on the gender-distinct RP2000 Combined Healthy Mortality Table, with male rates multiplied by 109%and female rates multiplied by 103%.The rates are projected on a fully generational basis by scale BB to account for future mortality improvements. For disabled annuitants, the gender-distinct RP2000 Disabled Retiree Mortality Table is used, with slight adjustments. Actuarial assumptions used in the December 31, 2014, valuation were based on the results of actuarial experience studies. The experience study in TMRS was for the period January 1, 2006 through December 31, 2009, first used in the December 31, 2010 valuation. Healthy post- retirement mortality rates and annuity purchase rates were updated based on a Mortality Experience Investigation Study covering 2009 through 2011,and dated December 31,2013. These assumptions were first used in the December 31,2013 valuation,along with a change to the Entry Age Normal (EAN) actuarial cost method. Assumptions are reviewed annually. No additional changes were made for the 2014 valuation. The long-term expected rate of return on pension plan investments is 7.0%. The pension plan's policy in regard to the allocation of invested assets is established and may be amended by the TMRS Board of Trustees.Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income, in order to satisfy the short-term and long-term funding needs of TMRS. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table; 37 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Long-term Expected Real Rate Target of return Asset Class Allocation (arithmetic) Domestic Equity 17.50% 4.80% International Equity 17.50% 6.05% Core Fixed Income 30.00% 1.50% Non-Core Fixed Income 10.00% 3.50% Real Return 5.00% 1.75% Real Estate 10.00% 5.25% Absolute Return 5.00% 4.25% Private Equity 5.00% 8.50% Total 100.00% Discount Rate The discount rate used to measure the Total Pension Liability was 7.0%. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rates specified in statute. Based on that assumption,the pension plan's Fiduciary Net Position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore,the long-term expected rate of return on pension pian investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. Changes in the Net Pension Liability Increase(Decrease) Total Pension Plan 1~idutiary Net Pension Liability Net Position Liability (a) (b) (a)-(b) Balance at 12/31/2013 $ 3,838,212 $ 2,890,936 $ 947,276 Changes for the year: Service Cost 429,268 - 429,268 Interest 277,884 - 277,884 Change of benefit terms - - - Difference between expected and actual experience (173,824) - (173,824) Changes of assumptions - - - Contributions-employer - 270,279 (270,279) Contributions-employee - 170,293 (170,293) Net investment income - 165,488 (165,488) Benefit payments, including refunds of employee contributions (166,160) (166,160) - Administrative expense - (1,727) 1,727 Other Changes - (142) 142 Net Changes 367,168 438,031 (70,863) Balance at 12/31/2014 $ 4,205,380 $ 3,328,967 $ 876,413 38 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Sensitivity of the net pension liability to changes in the discount gate The following presents the net pension liability of the City, calculated using the discount rate of 7.0%, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower(6.0%)or 1-percentage-point higher(8.0%)than the current rate: Sensitivity of the Net Pension Liability to Changes in the Discount Rate 1% Decrease 6.00% Current Single Rate 1%Increase 5.00% assumption 7.00% $1,624,806 $876,413 $278,109 Pension PIan Fiduciary Net Position Detailed information about the pension plan's Fiduciary Net Position is available in a separately- issued TMRS financial report. That report may be obtained on the Internet at www.tmrs.com. E. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended of September 30,2015 the City recognized pension expense of$322,913. The calculation and amount is provided in the GRS Reporting Package. At September 30, 2015 the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred(Inflows)/ Outflows in Future Expense Differences between expected and actual economic experience $ (150,080) Changes in actuarial assumptions $ - Difference between projected and actual investment earnings $ 29,502 Contributions subsequent to the measurement date $ 276,645 Total $ 156,067 39 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) $276,645 reported as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability for the year ending on September 30,2015. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Net deferred outflows (inflows) of Year resources 2015 $ (16,368) 2016 (16,368) 2017 (16,368) 2018 (16,370) 2019 (23,744) Thereafter (31,360) Total $ (120,578) F. Other Postemployment Benefit The City also participates in the cost sharing multiple-employer defined benefit group-term life insurance plan operated by the Texas Municipal Retirement System (TMRS) known as the Supplemental Death Benefits Fund(SDBF).The City elected,by ordinance,to provide group-term life insurance coverage to both current and retired employees. The City may terminate coverage under and discontinue participation in the SDBF by adopting an ordinance before November 1 of any year to be effective the following January 1. The death benefit for active employees provides a lump-sum payment approximately equal to the employee's annual salary (calculated based on the employee's actual earnings, for the 12-month period preceding the month of death);retired employees are insured for$7,500;this coverage is an "other postemployment benefit," or OPEB. The City contributes to the SDBF at a contractually required rate as determined by an annual actuarial valuation. The rate is equal to the cost of providing one-year term life insurance. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death benefit payments for the upcoming year;the intent is not to pre-fund retiree term life insurance during employees' entire careers. The City's contributions to the TMRS SDBF for the years ended 2015,2014 and 2013 were$3,182, $3,135 and $2,890, respectively, which equaled the required contributions each year. NOTE L—SUBSEQUENT EVENTS Subsequent events have been evaluated through the date of issuance, which is the date of the auditor's report, and there are no known items. 40 REQUIRED SUPPLEMENTARY INFORMATION City of Anna,Texas Budgetary Comparison Schedule Budget and Actual - General Fund For the Year Ended September 30,2015 Variance with Amended Budget- Original Amended Actual Positive Budget Budget Amounts (Negative) Revenues Taxes: Property $ 2,788,561 $ 2,788,561 $ 2,790,773 $ 2,212 Sales 630,000 700,000 736,481 36,481 Franchise 365,000 440,000 450,799 10,799 Building permits 324,000 324,000 381,318 57,318 Developer and impact fees 135,250 135,250 92,012 (43,238) Intergovernmental 108,925 108,925 114,200 5,275 Court 113,950 113,950 115,027 1,077 Inspection fees - - 187,925 187,925 Other development fees 55,300 55,300 86,957 31,657 Fire 69,406 69,406 69,826 420 Parks 10,950 20,950 63,265 42,315 Other revenue 39,592 39,592 59,958 20,366 Grants and contributions 132,569 132,569 15,053 (117,516) Investment earnings 12,000 12,000 17,371 5,371 Police 7,607 7,607 25,400 17,793 Total revenues 4,793,110 4,948,110 5,206,365 258,255 Expenditures Current: Police 1,430,264 1,423,900 1,370,091 53,809 Administrative and general 1,012,129 1,034,079 1,042,050 (7,971) Development and animal control 558,188 538,188 559,583 (21,395) Fire 735,107 738,107 688,371 49,736 Parks 229,989 249,989 246,808 3,181 Streets 182,221 182,221 200,188 (17,967) Ambulance 123,683 123,683 124,155 (472) Court 138,519 138,519 132,675 5,844 Capital outlays: 247,412 496,362 469,276 27,086 Total expenditures 4,657,512 4,925,048 4,933,197 91,851 Excess of revenues over(under)expenditures 135,598 23,062 373,168 350,106 Other financing sources(uses) Proceeds from sold assets 39,000 104,000 65,000 (39,000) Transfers in(out) - - (190,276) (190,276) Total other financing sources(uses) 39,000 104,000 (125,276) (229,276) Net changes in fund balance 174,598 127,062 247,892 120,830 Fund balance-beginning 3,050,716 3,050,716 3,050,716 Fund balances-ending S 3,225,314 $ 3,177,778 $ 3,298,608 Nates to the budgetary comparison schedule: This schedule ivas prepared on the modified-accrual basis of accounting and thus has no reconciling items ivith General Fund amounts on the Statement of Revenues, Expenditures, and Changes in Fund Balances presented on page 14. 41 CITY OF ANNA SCHEDULES OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS Last 10 Years (will ultimately be displayed) 2014 Total pension liability Service Cost $ 429,268 Interest (on the Total Pension Liability) 277,884 Changes of benefit terms - Difference between expected and actual experience (173,824) Change of assumptions - Benefit payments, including refunds of employee contributions (166,160) Net Change in Total Pension Liability 367,168 Total Pension Liability -Beginning 3,838,212 Total Pension Liability -Ending(a) $ 4,205,380 Plan Fiduciary Net Position Contributions - Employer $ 270,279 Contributions - Employee 170,293 Net Investment Income 165,488 Benefit payments, including refunds of employee contributions (166,160) Administrative Expense (1,727) Other (142) Net Change in Plan Fiduciary Net Position 438,031 Plan Fiduciary Net Position - Beginning 2,890,936 Plan Fiduciary Net Position - Ending (b) $ 3,328,967 Net Pension Liability - Enging (a) - (b) $ 876,413 Plan Fiduciary Net Position as a Percentage of Total Pension Liability 79.16% Covered Employee Payroll $ 2,432,756 Net Pension Liability as a Percentage of Covered Employee Payroll 36.03% Notes to Schedule: GASB 68 requires 10 fiscal years of data to be provided in this schedule. GRS will provide the current year results. The employer will be required to build this shcedule over the next 10 year period. 42 CITY OF ANNA SCHEDULE OF T.M.R.S.CONTRIBUTIONS Last 10 Fiscal Years (will ultimately be displayed) 2015 Actuarially Determined Contribution $ 353,170 Contributions in relation to the actuarially determined $ 353,170 Contribution deficiency (excess) $ - Covered employee payroll $ 2,881,090 Contributions as a percentage of covered employee payroll 12.26% NOTES TO SCHEDULE OF CONTRIBUTIONS Valuation Date: Notes Actuarially determined contribution rates are calculated as of December 31 and become effective in January 13 months later. Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Entry Age Normal Amortization Method Level Percentage of Payroll, Closed Remaining Amortization Period 29 years Asset Valuation Method 10 Year smoothed market; 15% soft corridor Inflation 3.0% Salary Increases 3.50%to 12.00% including inflation Investment Rate of Return 7.00% Retirement Age Experience-based table of rates that are specific to the City's plan of benefits. Last updated for the 2010 valuation pursuant to an experience study of the period 2005 - 2009. Mortality RP2000 Combined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109% and female rates multiplied by 103% and projected on a fully generational basis with scale BB. Other Information: Notes Adopted 20 year, any age retirement eligibility. 43 COMBINING STATEMENTS-NON-MAJOR GOVERNMENTAL FUNDS CITY OF ANNA,TEXAS COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL TYPE FUNDS SEPTEMBER 30,2015 Capital Debt Community Economic Total Other Projects Service Development Development Governmental Fund Fund Corporation Corporation Funds ASSETS Cash and cash equivalents $ 156,584 10,684 $ 493,422 $ 477,565 $ 1,138,255 Accounts receivable-Net Ad valorem taxes - 8,691 - - 8,691 Sales tax - - 64,823 64,823 129,646 Due from other funds 40,326 - - - 40,326 Note Receivable-Local business - - 41,310 100,427 141,737 Total current assets 196,910 19,375 599,555 642,815 1,458,655 LIABILITIES Liabilities: Due to other funds 355,884 54,850 - - 410,734 Total liabilities 355,884 54,850 - - 410,734 DEFERRED INFLOWS OF RESOURCES Unavailable revenues- property taxes - 8,690 - - 8,690 Unavailable revenues-business loans - - 41,310 100,427 141,737 Total deferred inflows of resources - 8,690 41,310 100,427 150,427 FUND BALANCES: Restricted for: Economic development - - - 542,388 542,388 Community development - - 558,245 - 558,245 Unassigned (158,974) (44,165) - - (203,139) Total fund balances (158,974) (44,165) 558,245 542,388 897,494 Total liabilities,deferred inflows, and fiend balances $ 196,910 $ 19,375 $ 599,555 $ 642,815 $ 1,458,655 44 CITY OF ANNA,TEXAS COMBINING STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENTAL TYPE FUNDS FOR THE YEAR ENDED SEPTEMBER 30,2015 Capital Debt Community Economic Total Other Projects Service Development Development Governmental Fund Fund Corporation Corporation Funds REVENUES Taxes Ad valorem $ _ $ 526,744 $ - $ - $ 526,744 Sales and use - - 368,308 368,308 736,616 Other income 500 - 35,935 - 36,435 Grants and contributions 120,896 - - - 120,896 Rentals - - - 30,000 30,000 Interest earned 392 964 2,578 2,380 6,314 Total revenues 121,788 527,708 406,821 400,688 1,457,005 EXPENDITURES Operating: General government 2,291 4,664 108,658 11,346 126,959 Promotions - - 35,612 37,097 72,709 Contract services - - 4,648 139,475 144,123 Capital Outlays: 237,345 - 48,914 - 286,259 Debt Service: Principal retirement - 317,000 80,000 69,776 466,776 Interest expense - 121,942 58,155 20,234 200,331 Total expenditures 239,636 443,606 335,987 277,928 1,297,157 Excess(deficiency)of revenues over(under)expenditures (117,848) 84,102 70,834 122,760 159,848 OTHER FINANCING SOURCES(USES) Bond Proceeds - 1,462,000 - - 1,462,000 Debt Issuance - (38,350) - - (38,350) Debt principal paid to refunding escrow bond - (1,334,000) - - (1,334,000) Other payments to refunding escrow bond - (77,398) - - (77,398) Transfers In(Out)-General Fund 190,277 - - - 190,277 Transfers In(Out)-Utility Fund 84,153 (84,802) - - (649) Total other financing sources(uses) 274,430 (72,550) - - 201,880 Net change in fund balances 156,582 11,552 70,834 122,760 361,728 Fund balances beginning,October 1 (315,556) (55,717) 487,411 419,628 535,766 Fund balances ending,September 30 $ (158,974) $ (44,165) $ 558,245 $ 542,388 $ 897,494 45 COMPLIANCE AND INTERNAL CONTROLS SECTION Susan Lal`0ett, CPA,—Partner Pod Abbott, CPA,—Partner rLaFo, and Abbott 'PLL ; Certified Public Accountant INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT A UDJ TING S TA NDA RDS To the City Council. City of Anna, Texas We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Gover°ninent Auditing .Standar(ls issued by the Comptroller General of the United. States, the financial statements of the governmental activities, the business-type activity, each major fund, and the aggregate remaining hind information of the City of Anna, Texas (the City), as of and for the year ended September 30, 2015, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated March 8, 2016.. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered. the City's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on. the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control.. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. Our consideration of internal control was for the limited purpose described in the preceding. paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore material weaknesses or significant deficiencies may exist that were not identified, However, as discussed below, we identified a. certain deficiency in internal control that we consider to be a material weakness. A deficiency in internal control exists when the, design or operation of a control does not allow management or employees, in the normal course of performing their assigned fx:rnctions, to prevent, or detect and correct, n-uisstatenients on a timely basis. A material weakness is a deficiency or a, combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstates-cent of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis. We consider the fallowing deficiency to be a material weakness: Finding 2015-1 — Year-end closing procedures for the Utility Fund did not identify and capitalize $767,937 of new Iong-term assets and also did not record the new $2,598,000 of Series 2014A Combination Tax and Revenue Refunding Bonds long-term debt. 46 LaFollett and Abbott PLLC PC) Box 717 , Tom Bean, TX w 75459 903-546-6975 • wv+rw.1af'ollettcpa.com A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free fiom material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. City of Anna, Texas Response to Findings The City's response is as follows: Each year the City of Anna has relied upon the expertise of an accounting consultant to complete year end closing entries and reconciliations. Each year City staff has been diligent to achieve greater responsibility in the yearend processes and diminish the role of the consultant; however, increased development, including capital projects, has led to more complex accounting transactions and entries. In particular, FY 15 included significant capital project activity and debt transactions issued to refund existing debt instruments into more favorable terms. The increased capital project activity and refunded debt are directly related to the material weakness identified. The first issue resulting in not identifying and capitalizing $767,937 in capital projects was an oversight by staff that can be easily corrected in future years. All internal work papers included the assets on the capital outlay and depreciation schedules, but did not include the final adjusting entry to capitalize the expenditures. Staff will conduct an additional check reconciling internal work papers to the general ledger trial balance once all adjusting entries have been entered into the accounting system. Once the weakness was identified, staff completed the work and presented the proposed entry to the auditors which was subsequently accepted. The second issue resulting in not recording the $2,598,000 in new debt issued to refund existing bonds was the result of poor coordination between staff and our accounting consultant and was overlooked in the Utility Fund debt work papers. Staff has discussed the issue with the consultant and once the weakness was identified, the consultant performed the work and presented the proposed entry to the auditors which was subsequently accepted. This weakness can easily be remedied by more effective coordination with the consultant on debt issues. Staff waits until the end of the fiscal year to coordinate any entries related to debt issues when all adjusting entries related to existing debt an entered into the general ledger. Journal transactions for new debt involve several general ledger accounts and can be difficult especially when refunding debt. As a matter of practice and policy, staff will coordinate with the consultant immediately following the issue of all future debt rather than waiting until the end of the fiscal year. 47 Finally, the City of Anna finance department added a full time accountant in the middle part of FY 15. Having a full time accountant has reduced reliance upon our accounting consultant for the FY 15 audit and we anticipate this trend to continue in future years. The City's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. p"a, OMM& pt)L Tom Bean, Texas March 8, 2016 48